Press Release

11 March 2009

Credit crunch sparks review of planning agreements

  • Past financial contributions made by developers to local authorities could be reclaimed
  • But developers warned that unpaid contributions are being tracked more closely by Local Authorities
  • Potential for claims and refunds to run into millions of pounds

 

The downturn has meant that both local planning authorities and developers are now reviewing past planning agreements for opportunities to claim and/or reclaim financial contributions towards local infrastructure works, says national law firm McGrigors.

 

McGrigors explains that developers often enter into planning agreements with local authorities when obtaining planning permission for their developments. In doing so they may be required to make cash contributions towards certain infrastructure works, such as highway improvements or community facilities , which the local authority or Secretary of State deems necessary for the development to go ahead.

 

According to McGrigors, these planning agreements frequently include trigger dates for a series of payments to be made by the developer, as well as claw back provisions setting out circumstances in which the developer can call on the local authority to return all or part of a payment that has not been used as intended. If a developer’s contribution is paid late or if money is due to be returned to a developer interest may be payable.

 

Alex O’Connor, Partner at McGrigors, comments: “Some local authorities are not monitoring all of their planning agreements to ensure that when a trigger date is reached the developer has paid the contributions that are due.”

 

“Equally many developers enter into planning agreements with local authorities and once they have handed over their contributions do not check whether the money has been spent within the time limit agreed. If the local authority does not spend the money as intended or the costs are less than the contribution made, the developer may be entitled to reclaim all or part of its contribution.”

 

McGrigors says that the total sums involved in large-scale developments run into millions of pounds worth of contributions to be made over a number of years.

 

According to McGrigors recent planning agreements and those currently being negotiated between developers and local authorities are also being reviewed and revised to ensure that planning obligations do not jeopardize the viability of new developments.

 

However, McGrigors points out that despite the downturn the Government has said that it will shortly be consulting on draft regulations that will introduce a Community Infrastructure Levy, a new levy to fund infrastructure such as roads, flood defences and community facilities.

 

Alex O’Connor says: “The timing of this could hardly have been worse. If implemented the new levy will often be an additional burden to developers on top of the existing requirements to make payments under planning agreements.”

 

“It was devised on the assumption that there would be hundreds of millions of pounds of additional cash from developers to fund new infrastructure but is being put forward at a time when both developers and local authorities are struggling to see some new developments come off the ground.”

Andy Peat

Business Development Director
Telephone: +44 (0)20 7054 2710
Mobile:  +44 (0)7894 835 386
Email: andy.peat@mcgrigors.com

Press Releases